Real estate business

Trump and his tax returns. People in the real estate business have special privileges built into the tax laws, the most important of which is depreciation. If I am a real estate agent and build an office/apartment building that cost 10 million dollars using a bank loan to finance the deal, I can deduct from rents received the interest and taxes on the loan. In addition I can deduct the cost of maintenance and repairs and the cost of depreciation. The cost of all of these items except depreciation represents out of pocket cost to me but depreciation is just a paper cost. Interest on a 10 million dollar loan for 30 years at 4%. $570,000 per year Taxes and insurance $100,000 Maintenance and repair estimated at 3% $300,000 Total $970,000 Rent received $970,000 This is a break-even situation but now enters depreciation. Buildings like this are depreciated over a 27.5 year schedule so this is 10 million divided by 27.5 or $360,000 per year. I can now deduct $360,000 from my other income so I can live a comfortable life without paying any income tax. This has been a part of the tax law for many years and credited with the growth in office buildings, shopping malls, apartments and condo complexes. The average voter is not familiar with how depreciation works and would only see that I did not pay any income tax. They would not take into account the risk I took investing in this project. They would not consider the fact that banks would not give such a loan to someone who did not have the character, collateral and credit to repay the loan. This is what Trump means when he says he uses OPM’s, other people’s money. At some point in the future if the building is sold at a profit, the gain is taxed at capital gain rates which are lower than regular income tax rates. This is how the real estate business works.